You are awesome!
So how’s that working out for you?
Are you making progress?
Do you know how much money you are spending daily?
You see the difference between people who trade their time generally for money (i.e. those who have a boss and a job) and those who trade their passions for other outcomes (i.e. entrepreneurs) is that the cash flow is not always clear or regular, particularly when you are starting off, in the startup phase.
So if you are to make progress you need to be commercial and that starts with you being financially savvy.
For example, do you know your burn rate? That is, how many days, weeks, months or even years that you need funding to get your big idea up and running? What income sources do you have? Are you sufficiently commercial to engage with financial backers, banks and independent investors? Or are you just going to hack at it and hopefully bust through?
Well if you read the stories of successful entrepreneurs, all approaches achieved results. It’s just that some of these entrepreneurs today when looking back, would say they would have taken a less traumatic path than the one they did.
Learn Financial Management 101
Look you do not need to become a financial expert, there are plenty of people who can help you here, but you do need some basic skills such as understanding cash flow, profit and loss, balance sheets and how to set up the financial structures. This is important because as your business grows and more transactions occur, you need robust controls in place. From my experience it is far easier to have things in place on day one and then scale, rather than try to implement controls when things are out of hand – in fact it is often at a recovery situation by then.
For example, if you are starting out, you often may revert to using your personal credit card for specific business purchases. While it may make no sense in these early days to set up a formal company structure, what may make sense instead is to set up a separate bank account and apply for a separate credit card. Although the credit card is still in your own name, you are now making a specific distinction between personal and business expenses. This also makes it easier at tax time as much of the work has already been done for you.
Taking it up a level, is to invest in accounting software. I have been using Quicken for years. I love it because I am so familiar with it and keeping it updated is a routine, at any time I can run a quick report or query and know exactly what my financial position is. However times change and now I am moving towards using Zero. I have researched various products and have concluded that this will suit my needs going forward – largely for its cloud based platform, scalability and integration features.
Now obviously this is not advice, so please speak to someone qualified in this area to discuss your needs. However what I have found that by putting in place the basics at the early stages, a strange thing happens mentally and emotionally. The very act signals an intent in your deeper consciousness that you are dam serious about this and while there is still a lot of blood, sweat and tears to come, you have stepped up to say to the world: “I am an entrepreneur, bring it on”! Furthermore, this sets up the foundations of expanding your financial management skills for the future – for example, when you are negotiating on a buyout!
Become Familiar With Your Legal Obligations & Strategies
Well, I am certainly not going to say too much here, after all there are people who can help. However let’s just make a list of some topics or themes that are to be considered and again to minimise my liability, this is not advice OK and this is not a comprehensive list, this is from a quick search on the internet from a couple of blogs… are you getting the picture of my claim to expertise here!
- Copyright and Intellectual Property
- Terms & Conditions / Contract Law
- Tax Law
- Company Law
- Income Protection
- Liability Protection
- Workers Compensation
- Anti Money Laundering
Again seek out expertise in this area. There is nothing wrong about using the internet for your initial research. For example, many countries have government departments set up to assist business. In Australia, the business.gov.au site is a great place to start with a whole lot of resources.
When it is time to speak to somebody, talk to those in your own network to see if you have any referrals. See this as an interview process, yes you want somebody with the skills but are they also aligned with you on your journey? To me this is very important because they will be part of your extended team that you are putting together.
Get A Handle On Your Risks
Corporates invest in hundreds of millions of dollars each year in identifying, controlling, preventing and mitigating risks from anything to brand damage through to information security. Of course as a startup, you do not have those resources at hand, but you still have risks and if they eventuate, they can be catastrophic.
So again you do not need to be an expert here, but it can start as simply as writing down a list of categories and then taking time to think about them on two dimensions:
- Firstly, how likely is this risk to occur?
- Secondly, if it occurs how big an issue would it be?
For example, what is the likelihood of your website crashing? What is the impact? What about after 24 hours, or after 48 hours?
You can build on this exercise and even allocate scoring and then graph all your risks on a 2 x 2 matrix if you are that way inclined (there are people who like graphs you know!) or do this same exercise on a napkin while you are getting your caffeine hit. Either way, get visibility on them and then ask yourself the next two questions:
- What do I need to do to mitigate these risks?
- What do I need to do if they occur – what’s my contingency?
So please don’t diminish your passion for your business and of course the important reasons why you are doing all this in the first place, but be commercial. If you put in place sound financial, legal and risk management structures from the very start, you are building a solid foundation for your future legacy.